Oracle, NetSuite Deepen Collaboration in the Cloud

Of all the confusing combinations of competition and collaboration these days Oracle and NetSuite were already champs. Wednesday was a day to sing Kumbaya.

The two companies–in one of three deals foreshadowed by Oracle last week–announced plans for broader cooperation in marketing online business apps for mid-sized customers. Among other things, the pact seems aimed at helping Oracle compete with the younger interloper WorkDay in a field known as human capital management.

There’s plenty of shared history. NetSuite, founded in 1998, was one of the first companies to offer software as an online service. It was largely bankrolled by Larry Ellison, Oracle’s chief executive, who still owns roughly half the company.

But the companies over the years began competing, to an extent. NetSuite specializes in ERP, or enterprise resource planning, which manages fundamental chores like a company’s general ledger, inventory and sales. Oracle, known originally for database software, bought a series of ERP applications that were originally installed on companies’ computers but later offered in online variants.

Generally, Oracle stuck to marketing to the world’s largest companies. NetSuite, meanwhile, specialized in smaller customers and, at times, smaller units of large ones, says Zach Nelson, a onetime Oracle executive who has been NetSuite’s CEO since 2002.

One thing NetSuite has not directly offered customers, Nelson says, is human capital management, or HCM–a broad term for applications that help manage how companies deal with employees from the moment they are hired and through their careers.

The field was pioneered by PeopleSoft, a company purchased by Oracle after a bruising takeover battle. WorkDay, which went public recently and has been growing quickly, was founded by former PeopleSoft executives.

Under the relationship announced Wednesday, the companies said they would deliver integrated services based on Oracle’s HCM and NetSuite’s ERP offerings for mid-size customers. The consulting firm Deloitte also said it will deploy specialists to help customers adopt the combined technologies faster and more effectively.

“We are going to compete where we compete,” Nelson said of Oracle in an interview.

But by focusing their efforts on mid-sized customers–not Oracle’s huge ones–the potential for conflict should be minimized, Nelson said.

The deal follows others Oracle announced with Microsoft and Salesforce.com earlier in the week. Ellison and Marc Benioff, Salesforce.com’s CEO, are scheduled to discuss their deal for the first time Thursday afternoon.